GBP vulnerable on UK politics – Danske Bank

Chief Analyst at Danske Bank Allan von Mehren assessed yesterday’s price action around the Sterling.

Key Quotes

“GBP underperformed yesterday among the other G10 currencies as UK politics weighed on the currency”.

“UK International Development Secretary Priti Patel resigned yesterday (newspapers earlier in the day reported that PM May was preparing to fire Patel). It is the second minister Theresa May has lost within a week, which underscores that the Prime Minister is currently under significant pressure in regain control of her cabinet”.

“The sixth round of Brexit negotiations starts today and could be a source of volatility”.

“Overall, we still expect EUR/GBP to trade within the 0.8650-0.90 range in coming months with risks skewed to the upside near term as UK politics, Brexit uncertainty and relative rates are likely to remain EUR/GBP supportive. Tactically, we would consider buying on dips towards 0.88 with tight stops around 0.8760 for a new test of the 2 November high at 0.89389”.